Bankless: 8 Bitcoin L2s You Should Be Watching
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Bankless: 8 Bitcoin L2s You Should Be Watching
One of the next major frontiers in cryptocurrency is the newly revived Bitcoin Layer 2 scene.
Navigating Web3 tides with focused insightsBy William M. Peaster & David C, Bankless
Translated by Deng Tong, Jinse Finance
With Bitcoin reaching new all-time highs, it's time to take a closer look at one of the investment narratives helping to rekindle interest in the asset: Bitcoin L2s.
Bitcoin is the oldest blockchain and certainly the most battle-tested cryptocurrency. But could this also be its biggest drawback? Transactions are slow and expensive, especially during periods of high activity. The Lightning Network—a payment channel protocol within Bitcoin’s scaling landscape—is a serious and interesting effort, but has so far failed to achieve breakout appeal due to user experience and liquidity challenges.
That said, the arrival of Ordinal NFTs in January 2023 triggered a massive resurgence of interest in building on Bitcoin, revitalizing existing scaling efforts like Stacks and fueling a wave of new initiatives employing diverse approaches.
Thus, one of crypto’s next major frontiers is this newly revived Bitcoin Layer 2 ecosystem—so let us walk you through some of the emerging contenders aiming to enhance Bitcoin’s capabilities.
Here are eight Bitcoin L2 projects you should know about.
Bison Network
Developed by Bison Labs, Bison Network is a zero-knowledge (zk) rollup solution leveraging ZK-STARK technology. It aims to significantly increase transaction throughput, reduce fees, and integrate smart contract functionality around BTC.
By utilizing Ordinals for data storage, Bison ensures that all transactions and smart contracts are as secure and immutable as the underlying Bitcoin blockchain. Its infrastructure includes Bison OS for managing transactions and token contracts, along with the Bison Prover for generating zero-knowledge proofs.
This setup paves the way for more Bitcoin DeFi experimentation and allows users to independently verify transactions quickly and efficiently.
Stacks
Stacks stands out in the Bitcoin L2 landscape due to its unique approach to expanding Bitcoin’s functionality—primarily by integrating smart contracts directly on top of Bitcoin. It uses a distinctive consensus mechanism called Proof-of-Transfer (PoX), fundamentally tying its operations and security directly to Bitcoin.
A key feature that sets Stacks apart is how users can earn BTC by staking STX tokens. This approach not only incentivizes participation in the Stacks ecosystem but also strengthens the bridge between Stacks and Bitcoin, enhancing the value proposition of both networks.
The upcoming Nakamoto upgrade will transform Stacks into a proper L2 by fully inheriting Bitcoin’s security, further solidifying its position. This upgrade will also introduce faster block generation times on Stacks, independent of Bitcoin’s block timing, while still achieving 100% Bitcoin finality. This means once a transaction is confirmed on Stacks, it inherits the same level of irreversibility as a Bitcoin transaction.
BitVM
BitVM introduces a novel approach to Bitcoin smart contracts without changing Bitcoin’s existing rules. The system enables verification on Bitcoin rather than execution of computation—similar in concept to optimistic rollups on Ethereum.
At its core, BitVM employs a unique combination of hash locks, time locks, and a large merkle root tree system to execute general-purpose computations. This design allows programs to be executed off-chain with minimal on-chain footprint, requiring on-chain operations only in the event of disputes.
While BitVM is still in early stages, its potential to enable advanced functionalities such as two-way pegged Bitcoin sidechains and rollups suggests a promising path toward expanding the OG blockchain’s capabilities without requiring a soft fork.
Botanix
Botanix Labs is pioneering the "spiderchain" design—a new L2 format enabling seamless two-way pegged sidechains with Bitcoin without altering Bitcoin’s base layer. The in-development Botanix protocol is the first implementation of this novel approach and integrates with the Ethereum Virtual Machine (EVM), bridging the robustness of Bitcoin with the versatile smart contract ecosystem of Ethereum.
At the heart of the spiderchain concept is a network of coordinators that manage a multi-signature wallet, facilitating the deposit and withdrawal processes between Bitcoin and the spiderchain. These orchestrators run both Bitcoin nodes and spiderchain nodes, and are selected randomly based on Bitcoin block hashes to ensure fair and secure operations.
Chainway
Chainway is another rising force in the Bitcoin L2 space, backed by notable venture firms such as Galaxy Digital and Delphi Ventures. The team has released BitcoinDA, a data availability adapter enabling rollups to connect to Bitcoin, and has also begun work on Citrea—a zk-rollup solution using BitVM to write its proofs onto Bitcoin.
Citrea is designed as a "Type 2 zkEVM" for Bitcoin and uses zero-knowledge proofs to batch transactions, then ensures validity via succinct proofs. This approach allows anyone running a Bitcoin node to easily verify and access Citrea’s full state. Citrea uses $BTC as its native token (cBTC within Citrea), offering broader transactional utility for the OG cryptocurrency.
Kasar Labs
Kasar Labs, a Starknet engineering and research team, is working on integrating Starknet’s zk-rollup capabilities with Bitcoin. Recently, they partnered with Taproot Wizards to launch a data availability adapter allowing developers to anchor rollups to Bitcoin.
Kasar’s work also includes Barknet, a new Bitcoin rollup leveraging Starknet’s Madara sequencer and Cairo VM to harness the power of Starknet’s advanced cryptographic proofs.
Merlin Chain
Merlin Chain is another EVM-compatible zk-rollup project built by the Bitmap Tech team as an L2 to scale a range of native Bitcoin protocols including Atomicals, Bitmaps, BRC-20s, Stamps, and more. Merlin Chain recently launched its mainnet and initiated a staking campaign aimed at fairly distributing its upcoming $MERL governance token. As a result, Merlin Chain has added $2 billion in TVL since February 9.
Ark
Ark is a novel L2 designed to enhance Bitcoin’s transactional scalability. Unlike traditional approaches relying on state channels or rollups, Ark introduces a unique method using Virtual Transaction Outputs (VTXOs), enabling anonymous, off-chain payments. These VTXOs must be used or "refreshed" within four weeks to prevent expiration.
At the core of Ark’s operation are untrusted intermediaries known as Ark Service Providers (ASPs)—always-on servers that provide liquidity, similar to Lightning Network service providers, but without requiring users to manage their own liquidity. This setup enables users to send and receive payments anonymously, protecting their privacy without the complexity of entry-level setups like acquiring inbound liquidity.
A key process in Ark’s operation is called "lifting," where users can trustlessly convert on-chain UTXOs into off-chain VTXOs. Additionally, Ark’s design enables transactions without a direct link between sender and receiver, significantly reducing on-chain footprint compared to traditional methods like the Lightning Network.
The Big Picture
Today, Bitcoin’s market cap exceeds $1.3 trillion, yet much of the capital on the network remains idle due to limitations in programmability and scalability.
The evolving Bitcoin L2 ecosystem is emerging as a strategic response to these constraints, rejuvenated by the rise of Ordinals and increasingly inspired by Ethereum’s layered architectural evolution.
This L2 evolution, combined with growing institutional interest fueled by the approval of the first spot Bitcoin ETF in the U.S., lays the foundation for a resurgence in Bitcoin adoption. As these developments unfold, Bitcoin is poised to transition from a primarily passive store of value to an active, programmable cryptocurrency—a shift that could redefine its role in the broader crypto economy and open new frontiers for innovation and growth!
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